Write-off debt claims 'misleading'
An advert by a claims management company that purported it was able to write-off borrowers’ debt has been banned by the advertising watchdog after a complaint by Lloyds TSB.
Debt Free claimed in its advert that credit cards and loans taken out before April 2007 could be unenforceable and might not need to be repaid. It then offered to help borrowers write-off their debt and claim compensation using “government legislation” – a reference to the Consumer Credit Act that includes strict rules about the way credit agreements look and are issued.
Lloyds challenged the advert, accusing the company of misleading potential customers. The bank argued to the Advertising Standards Authority (ASA) that the advert exaggerated the likelihood of debt being written-off and made no mention of any fees involved.
Although Debt Free argued that around 76% of credit cards and 85% of loans had broken the terms of the Consumer Credit Act, it was unable to confirm exactly how many cases it had successfully challenged. It added that it didn’t deny that people would have to pay a fee in return for its service, and that these costs varied depending on the client’s circumstances.
Despite these justifications, the ASA upheld Lloyds’ complaint and banned the advert. The ruling may lead to stricter advertising rules for claims management companies.
Adverts claiming to be able to write-off debt, or claim compensation for people who have been mis-sold financial products, have become more commonplace since the onset of the credit crunch.
The Ministry of Justice, which regulates these types of firms, recently warned consumers of the danger of trying to get their debts written off. Even though many firms are licensed, there are no official stats illustrating how many borrowers successfully manage to avoid repaying their debts.
In fact, the chances of getting your debts wiped out is unlikely, according to Citizens Advice. The charity also points out that successful borrowers will only get their money refunded – there is no compensation available – and a proportion of this will be eaten up by the claims management company’s fees.
If you do believe you have been mis-sold a financial product or are concerned your credit agreement did not adhere to the Consumer Credit Act, then you can get free advice from Citizens Advice and the Consumer Credit Counselling Service.
For more on rip-off financial products see the July issue of Moneywise magazine
Claims management companies
Regulated by the Claims Management Services Regulator since 2006, claims management companies offer advice and legal services in respect of claims for compensation, restitution, repayment for loss, damage or negligence. To many, the term is merely a polite euphemism for “no win, no fee” law companies. If you feel they offer services you need, approach with care.